Despite Holiday Shopping, Consumers Spent Less in December
%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%% The government's statistics are grimmer than the numbers reported by major retailers right after the end of the year, which showed shoppers had come out at the last minute to complete their holiday shopping. The Commerce Department's numbers include a more varied segment of retail, such as gas stations and auto dealerships, as well as the totals for Wal-Mart Stores (WMT), the world's largest retailer, which doesn't report monthly totals publicly.
Sales at gas stations shot up 33.6% over December 2008, thanks in no small part to a sharp increase in the price of oil over the last six months; but gas station sales were 24.5% down for the full year. Prices at the pump are now hovering around $3 per gallon in high-cost areas, and are likely to go higher in spring and summer, despite lower demand due to unemployment.
Beyond gas stations, most increases were modest; only non-store retailers saw a double-digit increase of 10.3% year-over-year in December. That category includes online retailers, which have continued to grow through the recession. For the full year, the only categories that saw any growth were health and personal care retailers (up 3.3% year-over-year), bars and restaurants (up 0.7%), and food and beverage stores (up 0.3%).
There was weakness in all the obvious areas: Hardware and furniture stores (down 5.8% and 3.8%, respectively) continue to suffer from the softness in the housing market, while department stores (down 1.2%) are still working through a decade of decline and only recently have begun to benefit from an improvement in the luxury market. Electronics stores (down 0.7%), meanwhile, are seeing strong unit sales, but their totals are getting squeezed by drops in the prices of big-ticket items, such as laptops and flat-screen TVs.
The latest numbers only bolster what retail observers have been saying all along: Consumers remain cautious because the employment picture continues to disappoint, and January sales will be slow as usual, regardless of any gift card redemptions.
The International Council of Shopping Centers' weekly figures for the first full week of the year found sales 3% below the week before, as shoppers found the clearance racks well picked-over. ICSC Chief Economist Michael Niemira said shoppers are in bargain-hunting mode; his report forecasts that January sales will be flat to up 1% compared to last year's.
"While the consumer appears to be spending again, double-digit unemployment numbers will remain an impediment to maintaining this momentum," said Rosalind Wells, chief economist of the National Retail Federation, in a statement.
With that in mind, the government's announcement of an increase in initial jobless claims, which came almost almost in tandem with the retail figures, is a bad sign. Retail still makes up over 70% of U.S. economic activity and it's still the biggest employment sector. Until it recovers, the economy will continue to limp along.